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Saving for your retirement doesn’t have to be hard work, but according to a recent study, almost everyone is doing it wrong.
Results from the study show that over 50s are dangerously misjudging their level of pension savings, some underestimating the amount they would need by half.
The survey asked 1500 people over the age of 50 to estimate what annual income they would need to fund their retirement, and how much they thought they would need to have saved to generate that level of revenue.
The survey revealed people were underestimating the latter amount by over 50 per cent.
Respondents claimed that they would need on average £15,200 a year, used to cover basics such as rent and mortgage repayments. For this amount, they estimated that they would need a total pension pot of around £145,000.
A pension pot this size would generate only £7,940 in guaranteed annual income for life for a healthy 65-year old – falling 50 per cent foul of their original guess.
When asked about a comfortable retirement, respondents thought that their pensions should stretch to one or two holidays a year, maintain several inexpensive hobbies and allow them to eat out on a regular basis.
To lead this life, an annual income of £21,650 is recommended and the pension pot needed to generate this amount is around £400,000 – far from the £194,000 the over 50’s thought would be appropriate.
The study also explained how long the estimated pension pot would last in drawdown – where a pension is left invested – & discovered the average saver would run out of money after 13 years.
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